"Sans-culotte" minister alarms investors in France

PARIS (Reuters) - Snarling at bosses who shut down factories, bashing low-price Asian exporters and telling an Indian steel baron he can get out of France, the industry minister in Paris is a loose cannon in a government striving to attract investment.

At home, Arnaud Montebourg's leftist tirades offer political cover to Socialist President Francois Hollande, who has been forced by fear of recession to disappoint many who voted for him in May and has adopted pro-market policies to boost growth - such as raising unpopular sales duties to cut taxes on business.

Many French entrepreneurs are sanguine about the tousle-haired minister, who made his name as a campaigner against globalisation but has little clout in government policy. Some worry, however, that his outbursts may reinforce suspicion of Hollande among foreign investors and so could do real damage.

Highlighting the issue - indeed seizing on it with glee - London's market-friendly mayor told Indian business leaders this week they should flee the revolutionary "sans-culottes" running France and move their jobs and money across the English Channel.

"He's just a provocateur but he's putting foreign investment at risk," said investment adviser Gerard Dussillol, author of a 2012 book about France's economic predicament, after Montebourg verbally attacked Lakshmi Mittal, whose steel firm ArcelorMittal employs some 20,000 people in France.

"It's like some kind of Wild West comic strip where strangers get told 'You ain't welcome round these parts'."

"VENEZ A LONDRES"

In a row over Mittal's plan to shut down blast furnaces in the Socialist-voting steel belt, Montebourg accused the Indian tycoon of "shameful lies" and said on Monday: "We no longer want Mittal in France." He later softened his remarks.

Despite Montebourg's rhetoric, and Hollande's comment during his election campaign that the world of finance was his enemy, investors still buy French government debt as if it were rock-solid German paper - despite two credit-rating downgrades. And businesses have welcomed Hollande's new corporate tax rebates.

But anti-capitalist oratory has made France a target for regional rivals, notably in Conservative-governed Britain, eager to challenge France's position as Europe's No.2 economy.

Come to London, its mayor Boris Johnson urged executives in New Delhi on Tuesday: "The sans-culottes appear to have captured the government in Paris and a French minister has been so eccentric as to call for a massive Indian investor to depart from France," he said. "I have no hesitation or embarrassment in saying to everyone here, 'Venez a Londres, mes amis'."

FAR-REACHING REFORMS

Montebourg's stand against letting economic cycles dictate employment clashes with Finance Minister Pierre Moscovici's efforts to persuade the world that the government has set France on an unprecedented course of "Copernican" structural reform.

A warning by Montebourg, 50, that France would nationalise the Florange steel plant before allowing furnace closures came as such a shock that another cabinet minister rushed to rein him in, saying a government takeover was not on the cards.

Hollande has given the Luxembourg-based group until Friday to avert the closures and Montebourg wants a temporary nationalisation until a buyer can be found.

Moscovici assured reporters this week that having spoken to a group of foreign investors, he could vouch that they were at ease with the six-month-old Socialist government's policies.

"This is not about returning to an older way of thinking, carrying out massive, general, permanent nationalisations," Moscovici said of the possible temporary takeover of Florange.

The playoff between Moscovici and Montebourg, who work on different floors of the same finance ministry building, is part of a balancing act within a government that aims to keep both left-wing voters and foreign investors happy as Hollande battles to pull the economy out of a long slump.

Within France, many in business understand that.

"Montebourg's a good guy when he's alone with you and there are no cameras, but when the public is watching he flips and says offensive things," a French finance executive told Reuters privately, adding that the Mittal row was risky: "You can't say that about a company that employs 20,000 people in France."

Abroad, perceptions of a government that includes Montebourg can be more outspokenly hostile. The CEO of one major European company, speaking privately, described some of France's leaders this week as "a bunch of people who are living in la-la land".

Montebourg appears to have limited influence over policy.

Given the grand title of Minister for Industrial Renewal, he has spent much of his time dashing from one ageing factory to another, telling workers, often on camera, that he can save their jobs. But he has backpedalled in his row with Mittal and is proving powerless to save a troubled Peugeot car plant from closure that will put up to 10,000 jobs at risk.

Yet while Hollande may see an electoral utility in having such a voice from the left in government, mixed messages from the administration can look like muddled thinking of a kind unlikely to encourage the kind of investment France is seeking.

"Montebourg plays an important role, as he has these radical credentials. The strength of feeling around the idea of state intervention to preserve jobs is very real," said Paris-based political scientist Christopher Bickerton.

"What's more worrying is that all this shows there's not a lot of clear thinking about what industrial policy should be."